Why gold could ‘brenefit’ regardless of Brexit vote outcome

The United Kingdom's referendum on whether to stay in or leave the European Union has been big driver of currency and stock market volatility, but gold is also feeling the effects of uncertainty over the Brexit vote. And even as gold slides from its recent highs, two experts argue that it could rally no matter which way Thursday's vote comes down.

"I think that gold works whether we get that Brexit and chaos ensues [in which case] gold goes higher — or if peace prevails on the 'Bremain,' the dollar eases, providing a bid into gold, commodities and high yield," Rich Ross, head of technical analysis at Evercore ISI, said Tuesday on CNBC''s "Power Lunch."

To understand his point, one must grasp two of the primary forces that impact gold prices: the US dollar, and uncertainty. As the dollar slips, gold tends to rise, so a post-vote rise in the British pound and euro should tend to hurt gold prices. On the other hand, rises in uncertainty and declines in stock prices tend to be greeted by gold gains, which is why a vote against the status quo could send gold soaring.

Over the course of the month, gold has risen as much as $100 per troy ounce to $1,318.90, before sliding back to settle on Tuesday just above $1,272.

Dennis Davitt, portfolio manager at Harvest Volatility Management, agrees that gold could rise in either scenario. With this view, he admits that he sees the bullish case for an asset he generally advises investors to avoid.

To profit off gold's next move, Davitt favors pairing a long position in the gold-tracking ETF GLD with the sale of a higher-strike call option on the ETF. This will allow a trader to achieve a 2.5 percent yield merely by both owning gold and being willing to sell it if it rises 10 percent from current levels.

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Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.